The Philadelphia cable giant tried to cushion the impact of its
steep profit drop and dreary subscriber gains in the fourth quarter by pledging another $5 billion in stock buybacks. But what investors really wanted were signs of progress.
Instead, investors got another pep talk on the go-for-broke triple play strategy that's apparently now in fourth gear. Like cable rivals such as
, which has packaged video, phone and Net services for an introductory $99 monthly, Comcast is now offering its triple-play service bundle for the same price in the Boston area. Soon it will hit Indianapolis.
Given their existing video and fast Internet access capabilities, cable companies were expected to crush the telcos once they added phone service to the bundle. The threat forced phone companies to partner with satellite TV providers like
and to invest billions of dollars in fiber-optic expansion to deliver video.
But observers were far from dazzled with Comcast's progress report. After more than a year of network overhauls to provide advanced digital services like voice-over-Internet-protocol, or VoIP, calling, the company was expected to show big growth in subscribers. But it managed to add just 134,000 new VoIP customers in the fourth quarter. Comcast shares fell 95 cents to $27.04 at midday Thursday.
"It's a great strategy, but they aren't executing. Getting only 134,000 phone subscribers is a joke," says one money manager who owns the stock. "I'm as unimpressed with this company as I could possibly be."
Comcast's triple play chief Steve Burke said the preparation efforts are complete and that the company will add 1 million VoIP customers this year.
"We've laid the foundation for benefits in 2006 and beyond," Burke said on a conference call with analysts Thursday.
Analysts and investors note that the phone service has been an alarmingly cash-hungry project that's put a big drain on the company's operating finances.
Executives on the conference call were asked, but wouldn't get specific on how deep in the red the phone effort was running. They did respond generally, saying the "drag of
Comcast digital voice in 2006 won't extend to 2007.
The more-pain, no-gain scenario didn't sit well with the money manager.
"There's no pay offhere. At least with the Bells you have a dividend yield and growth in wireless," says the unnamed investor.
"It's a cheap stock," says the investor, "and I have to say, they've earned it."